In this paper, we analyse the relationship between the currency carry return and volatility and liquidity risk factors …. We find that both categories of risk factors are relevant to understanding and explaining carry return, with an … outperformance for volatility ones especially the global FX volatility risk factor. Consistent with the poor performance of currency …

boom yields consistently positive excess returns. This excess return compensates for the risk of high negative returns in … countries on risk aversion, and low (high) risk aversion currencies depreciate (appreciate) in times of global turmoil. …

In this paper, we measure currency carry trade funding risk using stock market volatility and crash risk in Japan, the … main funding currency country. We show that the measures of funding risk in Japan can explain 42% of the monthly currency …

a time-varying risk premium consistent with that bias. Using ten years of data on FX order flow we find that more than … find that carry trading increases currency-crash risk in that order flow generates negative skewness in FX returns. …

world. We show that even in this market exposure to liquidity risk commands a non-trivial risk premium of up to 3.6% per … annum. In particular, systematic and currency-specific liquidity risk are not subsumed by existing risk factors and … significantly correlated. This lends support to a liquidity-based explanation of the carry trade risk premium. To illustrate this …

measure of funding risk is the standard deviation of the magnitude of the funding constraints. This funding risk measure …, oil price volatility, as well as by the actions of the main central banks. Although funding risk has been present … constraints start binding at that time. We document evidence that since 2008 funding risk has affected the magnitude of currency …

should not. A risk premia story might justify the high returns to the carry trades. In this paper we study the relationship … risk factors. Asset pricing theory applies to the currency market: those currencies that have larger loading on risk …, especially crash risk, offer a larger mean return in compensation. Especially, we show that crash risk as measured by quantile …

represent a fair compensation for currency risk, we find that non-durable consumption risk and market risk can explain excess …

indicate market inefficiency and market behavior as they appear to. In the real world where forecasting errors are …